Debt debate puts federal workers on edge

John Fritze, The Baltimore Sun

WASHINGTON — As the pitched battle over the nation’s debt crisis shifts to the White House, federal employees in Maryland are bracing for a series of benefit cuts they say would have a devastating effect on the state’s economy.

Months after more than 200,000 federal workers in Maryland were hit with a two-year pay freeze to help reduce a $1.3 trillion budget deficit, many say they now are worried lawmakers are eying government retirement plans and health benefits for cuts in the scramble to strike a deal to raise the debt ceiling.

The government has until Aug. 2 to raise the $14.3 trillion debt limit or risk defaulting on the nation’s obligations. Republicans and many Democrats want significant budget cuts before they agree to lift that cap.

“Federal employees didn’t cause the deficit, why are we taking the big hit?” asked Joe McGeeney, the president of the local union that represents security workers at Baltimore-Washington International Thurgood Marshall Airport. “We know that Congress has to do a whole lot, but why start with federal employees?”

Bipartisan negotiations over the debt limit led by Vice President Joe Biden collapsed last week after Republican participants said they could not support tax increases sought by Democrats. President Barack Obama, who will now take a more active role in the debate, will meet with Senate leaders on Monday.

But lawmakers and observers alike predict that federal employees eventually will face deeper cuts, regardless of who brokers the final deal. Those cuts could have a disproportionate impact on Maryland, where the percentage of residents in civilian federal jobs is three times the national average.

Public employee unions have raised concerns for months about cuts to their pension plans. That was one of the early ideas discussed by the Biden task force as lawmakers began looking to slice trillions of dollars in spending.

But federal union leaders say they are now increasingly worried that their health benefits are also at risk, based on rumblings that surrounded the Biden talks as well as GOP proposals in Congress.

“It's certainly being voiced in the Republican caucuses,” said John Gage, president of the American Federation of Government Employees, which has 250,000 members. “We hear about a potential voucher system for our health care, which would be the death knell of the benefits plan.”

Rep. Chris Van Hollen, one of six lawmakers involved in the secretive talks, said none of the details over federal workers had been resolved in “final form” before negotiations broke down Thursday. Still, he said, he thinks the group accomplished enough on a range of issues to give Obama and Republican leaders a broad framework as they try to advance the debate.

Keeping to a policy he and other members of the group adopted throughout the negotiations, Van Hollen declined to discuss details of any proposals.

“Federal employees have indicated that they understand, as part of an overall effort to address our national challenge, that they’re willing to do their fare share,” said the Montgomery County Democrat, whose district includes a high concentration of federal workers.

But he went on to say that federal workers “should not bear the burden of deficit reduction.”

Though few concrete details from the now-stalled talks have emerged, both the pension and health care ideas were previously raised publicly by another bipartisan fiscal commission created by Obama.

Arguing that federal pensions are out of line with private retirement plans, that commission estimated that $73 billion could be saved through 2020 by deferring cost-of-living adjustments, requiring employees to pay a higher share of the costs, and pursuing other measures.

The group, which was co-chaired by Alan Simpson, a former Republican senator, and Erskine Bowles, a White House chief of staff under Bill Clinton, also estimated the government could save $18 billion by reducing the amount agencies contribute to employees' health care plans.

Federal workers enrolled in the popular Blue Cross Blue Shield family plan offered by the government pay roughly 33 percent of their premiums — which is in line with large private companies. Unions estimate that employees’ share of the premium could increase to nearly 60 percent under that proposal.

Jim Kessler, co-founder of the left-of-center think tank Third Way, said the pension idea, at least, seems to have gained traction. Separately, the U.S. Postal Service said last week it plans to save $800 million by forgoing pension contributions to its employees.

“I have not heard resistance from Democrats or Republicans for this idea,” said Kessler, who wrote a report last September arguing that federal employees enjoy a more generous retirement plan than is typically available in the private sector. “I think it has a very good chance of sailing through.”

Republicans have largely embraced the ideas.

“Private-sector job creators and families in my district have learned to do more with less,” Rep. Jason E. Chaffetz, a Utah Republican, said recently. “So should the federal government.”

But the proposed cuts come at a difficult time politically for Democrats, who rely on labor unions for money, votes and organizing help during the campaign season.

Public employee unions have been at the center of statehouse battles this year in Wisconsin and Indiana, where Republican governors have sought to limit their bargaining power. Democrats have tried to cast themselves as the defenders of government workers.

Tensions have increased. Seventeen labor groups sent a scathing letter to the White House earlier this month arguing that “the administration has turned its focus away from stimulating a stalling recovery and has instead embraced the currently popular, yet ill-conceived, mantra of immediate austerity.”

Colleen M. Kelley, president of the National Treasury Employees Union, said the group has geared up to defeat the proposed cuts, either before they emerge in a deficit-reduction proposal or after that measure heads to Capitol Hill, where it would ultimately have to be approved by lawmakers.

It’s a message she’s communicating regularly to her 150,000 members.

“I’m telling them that this is real. It’s not just a discussion about potential issues. This is something that is serious,” she said. “We’re doing everything we can to impact these talks.”

Technically, the U.S. hit the debt limit in mid-May. U.S. Treasury Secretary Timothy F. Geithner has said the government can use “extraordinary measures” to avoid defaulting on its obligations until Aug. 2.

Part of that effort includes reducing the government’s investment in pensions for federal workers.

Lawmakers and White House officials expressed confidence that they would reach a deal to raise the debt limit by August. But the path forward grew more murky last week after Virginia Rep. Eric Cantor, the second-highest ranking Republican in the House, walked away from the Biden-led debt talks.

For now, several lawmakers said they are waiting — like everyone else — to see what happens next.

“I’m very wary of these potential new proposals that would impact the federal workforce because I feel like they’ve already given at the office,” said Rep. John Sarbanes, a Baltimore County Democrat.

Before he decides whether he could support additional cuts from federal workers, he said, he wants to ensure that “those who can step up and contribute more are also being asked to help solve this problem.”

“Our federal workers have faced year after year of no pay raise,” she said. “I think this notion that somehow you’re going to balance the budget and clear up our debt and deficit on the backs of federal workers, is just not reality.”